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ESCROW AND SECURITY AGREEMENT
Dated as of July 17, 1998
From
DISCOVERY ZONE, INC.,
as Pledgor
to
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee and Security Agent
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ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (as amended, restated,
supplemented or modified from time to time, this "Escrow and Security
Agreement") is made and entered into as of July 17, 1998 by and among DISCOVERY
ZONE, INC., a Delaware corporation (the "Pledgor"), having its principal office
at 000 Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, XXXXXXXXX & COMPANY, INC., acting
as the Initial Purchaser (the "Initial Purchaser"), and FIRSTAR BANK OF
MINNESOTA, N.A., as trustee and collateral agent under the Indenture (as defined
below), having an office at 000 Xxxx 0xx Xxxxxx, Xx. Xxxx, Xxxxxxxxx 00000 (in
such capacity, the "Trustee") for the holders (the "Holders") of the Notes (as
defined herein) issued by the Pledgor under the Indenture referred to below, and
FIRSTAR BANK OF MINNESOTA, N.A., as Securities Intermediary having an office at
000 Xxxx 0xx Xxxxxx, Xx. Xxxx, Xxxxxxxxx 00000 (in such capacity, the "Security
Agent"). Capitalized terms not otherwise defined herein shall have the meanings
set forth in the UCC (as defined below) and the Federal Regulations contained in
Subpart D of 31 C.F.R. Part 357.
W I T N E S S E T H:
WHEREAS, the Pledgor and the Initial Purchaser are parties to
a Purchase Agreement, dated July 17, 1998 (the "Purchase Agreement"), pursuant
to which the Pledgor will issue and sell to the Initial Purchaser 20,000 Units,
each consisting of $1,000 principal amount of its 13 1/2% Senior Collateralized
Notes due 2002 (collectively, as replaced or exchanged by the 13 1/2% Senior
Collateralized Notes due 2002, Series B, or otherwise, the "Notes"), and
warrants to purchase shares of the Pledgor's common stock;
WHEREAS, the Pledgor and the Trustee, have entered into that
certain Indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Pledgor is issuing the Initial Notes on the date hereof;
WHEREAS, pursuant to the Purchase Agreement and the Indenture,
the Pledgor is required to deposit on the Issue Date any combination of cash,
securities, instruments and certificates in an escrow account established by the
Trustee with the Security Agent (such account, together with any successor
account, the "Escrowed Interest Account") to be held by the Trustee for its
benefit and the ratable benefit of the Holders to secure the Pledgor's
obligation (i) to provide for payment in full of any and all scheduled payments
of interest due on the Notes from the Issue Date through August 1, 1999 and (ii)
in the event that the Notes are required to be redeemed or prepaid or otherwise
become due and payable prior to August 1, 1999, to secure the partial repayment
of the principal, premium, if any, and interest on the Notes that are redeemed,
prepaid or otherwise due and payable (collectively, the "Obligations");
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WHEREAS, the Security Agent has established a Securities
Account (the "New York Securities Intermediary Account") with Bankers Trust
Company, New York, New York (together with any successors or assigns, the "New
York Securities Intermediary") as Security Agent's Securities Intermediary
located in New York, New York in which the Collateral (as defined below)
deposited into the Escrowed Interest Account will be held;
WHEREAS, pursuant to the terms and conditions of this Escrow
and Security Agreement, the Pledgor shall instruct the Trustee, and the Trustee
shall instruct the Security Agent, to purchase or caused to be purchased, with
all or a portion of the Escrowed Funds (as hereinafter defined), Securities
Entitlements in certain Pledged Securities (as hereinafter defined) to be
credited to the Escrowed Interest Account in the name of the Trustee (or as
otherwise required in accordance with applicable law), and under the sole
dominion and control (including "control" as defined in UCC ss. 9-115(1)(e)) of
the Trustee, with respect to which the Trustee is the sole Entitlement Holder,
as set forth herein;
WHEREAS, pursuant to the terms and conditions of this Escrow
and Security Agreement, the Security Agent shall instruct the New York
Securities Intermediary to purchase or cause to be purchased, with all or a
portion of the Escrowed Funds, Securities Entitlements in certain Pledged
Securities to be credited to the Escrowed Interest Account through the New York
Securities Intermediary Account in the name of the Trustee (or as otherwise
required in accordance with applicable law), and under the sole dominion and
control (including "control" as defined in UCC ss. 9-115(1)(e)) of the Security
Agent with respect to which the Security Agent is the sole Entitlement Holder,
as set forth herein; and
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor
has agreed to (i) pledge to the Trustee for its benefit and the ratable benefit
of the Holders, a security interest in the Escrowed Funds, the Pledged
Securities and the other Collateral (as hereinafter defined) and (ii) execute
and deliver this Escrow and Security Agreement in order to secure the payment
and performance by the Pledgor of all the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein
contained, and in order to induce the Holders to purchase the Notes, the
Pledgor, the Initial Purchaser, the Trustee and the Security Agent hereby agree,
for the benefit of the Trustee and the Security Agent and for the ratable
benefit of the Holders, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions. All defined terms used herein without
definition shall have the respective meanings ascribed to them in the Indenture.
Unless otherwise defined herein or in the Indenture, terms used in Articles 8 or
9 of the Uniform Commercial Code as in effect in the State of New York (the
"UCC") are used herein as therein defined.
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1.2 Pledge and Grant of Security Interest. As security for the
prompt and complete payment and performance of the Obligations (whether at the
stated maturity, by acceleration or otherwise), the Pledgor hereby pledges to
the Trustee for its benefit and for the ratable benefit of the Holders, and
hereby grants to the Trustee for its benefit and for the ratable benefit of the
Holders, a continuing first priority perfected security interest in and to all
of the Pledgor's right, title and interest in, to and under the following
(hereinafter collectively referred to as the "Collateral"), whether
characterized as investment property, general intangibles or otherwise: (a) the
Escrowed Interest Account, all funds and securities or other investment property
held therein and all certificates and instruments, if any, from time to time
representing or evidencing the Escrowed Interest Account, including, without
limitation, the Escrowed Funds and the Pledged Securities, and any and all
Security Entitlements to the Escrowed Funds and the Pledged Securities, and any
and all related Securities Accounts in which Security Entitlements to the
Escrowed Funds and the Pledged Securities are carried, (b) all notes,
certificates of deposit, deposit accounts, checks and other instruments from
time to time hereafter delivered to or otherwise possessed by the Security Agent
for or on behalf of the Pledgor in substitution for or in addition to any or all
then existing Collateral, (c) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Collateral, and
(d) all proceeds of any and all of the foregoing Collateral (including, without
limitation, proceeds that constitute property of the types described in clauses
(a) - (c) above) and, to the extent not otherwise included, all cash.
1.3. Deposit of Escrowed Funds. Concurrently, with the
execution and delivery of this Escrow and Security Agreement, the Pledgor has
deposited, or caused the Initial Purchaser to deposit $2,800,000 in cash
(collectively, the "Escrowed Funds") into the Escrowed Interest Account or such
greater amount as will be sufficient to provide for payment in full of the first
five (5) scheduled interest payments due on the outstanding Notes, being all
such scheduled interest payments from August 1, 1998 through August 1, 1999
(inclusive of the interest payments due and owing on August 1, 1998 and August
1, 1999, respectively). Until the date upon which the Escrowed Funds are
invested in accordance with Section 1.4 or Section 5, the Security Agent shall
invest the Escrowed Funds in money market accounts with any bank having capital
surplus and undivided profits aggregating at least $500 million or money market
funds investing only in U.S. Government Obligations to the extent such accounts
or funds do not impose any fee, cost or expense (such as a breakage fee) in
connection with any withdrawal, termination or liquidation of any such
investment; provided, however, that for the first Business Day from the Issue
Date the Escrowed Funds shall be invested in the instruments described in clause
(iv) of the definition of Cash Equivalent in the Indenture.
1.4. Purchase of Pledged Securities. At the direction of the
Pledgor, as set forth in a written notice (the "Pledged Securities Notice"), the
first of which will be delivered to the Security Agent, no later than three
business days after the date of this Escrow and Security Agreement, the form of
which is acceptable to the Security Agent, the Security Agent shall invest the
Escrowed Funds in U.S. Government Obligations in the manner as directed in the
Pledged Securities Notice (such U.S. Government Obligations, hereinafter, the
"Pledged Securities"); provided, to accomplish such investment the Security
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Agent shall obtain a Securities Entitlement in Pledged Securities that are
registered in the name of the New York Securities Intermediary on the records
of the FRBNY (as defined below) and credited by the New York Securities
Intermediary to the New York Securities Intermediary Account, which Securities
Entitlement shall be credited by the Security Agent to the Escrowed Interest
Account, for the benefit of the Trustee and the ratable benefit of the Holders
in accordance with the terms and conditions of this Escrow and Security
Agreement. Each Pledged Securities Notice shall specify the amount and nature of
the Pledged Securities required to be purchased by the Security Agent through
the New York Securities Intermediary with the Escrowed Funds and contain all
necessary directions or authorizations necessary or reasonably required by the
Security Agent to make such investment. The initial Pledged Securities Notice
shall be accompanied by a written opinion of a nationally recognized firm of
independent public accountants or a recognized financial advisor, selected by
the Pledgor and approved by the Initial Purchaser (the "Independent Financial
Advisor"), in form and substance reasonably acceptable to the Security Agent and
the Trustee, confirming that the aggregate amount of the Pledged Securities and
Escrowed Funds, after giving effect to the investment in the Pledged Securities
referred to in such Pledged Securities Notice, will be sufficient upon receipt
of scheduled interest and principal payments of all Pledged Securities to
provide for payment in full of all scheduled interest payments due on the
outstanding Notes during the period commencing on the Issue Date and ending on
August 1, 1999.
SECTION 2. Security for Obligation. This Escrow and Security
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. Delivery of Pledged Securities; Escrowed Interest
Account; Interest. (a) The Trustee shall become the holder of a Security
Entitlement to the Pledged Securities through action by the Security Agent, as
confirmed (in writing or electronically or otherwise in accordance with standard
industry practice) to the Trustee by the Security Agent (i) indicating by
book-entry that the Pledged Securities and all Security Entitlements thereto
have been credited to the Escrowed Interest Account, or (ii) acquiring the
Pledged Securities or a Security Entitlement thereto for the Trustee and
accepting the same for credit to the Escrowed Interest Account. All securities
or other property underlying any Financial Assets credited to the Escrowed
Interest Account shall be registered in the name of the Security Agent, endorsed
to the Security Agent or in blank or credited to the New York Securities
Intermediary Account maintained by the New York Securities Intermediary and in
no case will any Financial Asset credited to the Escrowed Interest Account be
registered in the name of the Pledgor, payable to the order of the Pledgor or
specially endorsed to the Pledgor except to the extent the foregoing have been
specially endorsed to the Security Agent or in blank. The Security Agent shall
become the holder of a Security Entitlement to the Pledged Securities through
action by the New York Securities Intermediary, as confirmed (in writing or
electronically or otherwise in accordance with standard industry practice) to
the Security Agent by the New York Securities Intermediary (i) indicating by
book-entry that the Pledged Securities and all Security Entitlements thereto
have been credited to the New York Securities Intermediary Account, or (ii)
acquiring the Pledged Securities or a Security Entitlement thereto for the
Security Agent and accepting the same for credit to the New York
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Securities Intermediary Account. All securities or other property underlying any
Financial Assets credited to the New York Securities Intermediary Account shall
be registered in the name of the New York Securities Intermediary, endorsed to
the New York Securities Intermediary or in blank or credited to another
securities account maintained in the name of the New York Securities
Intermediary and in no case will any Financial Asset credited to the New York
Securities Intermediary Account be registered in the name of the Pledgor,
payable to the order of the Pledgor or specially endorsed to the Pledgor except
to the extent the foregoing have been specially endorsed to the New York
Securities Intermediary or in blank.
(b) Prior to or concurrently with the execution and
delivery hereof and prior to the transfer to the Trustee of the Pledged
Securities (or acquisition by the Trustee of any Security Entitlement thereto)
as provided in subsection (a) of this Section 3, the Trustee shall establish
with the Security Agent the Escrowed Interest Account, as identified on Schedule
A hereto, on the books of the Security Agent as a Securities Account and the
Security Agent shall simultaneously establish or shall have established with the
New York Securities Intermediary, the New York Securities Intermediary Account,
as identified on Schedule A hereto, on the books of the New York Securities
Intermediary as a Securities Account which the New York Securities Intermediary
shall maintain at the offices of the New York Securities Intermediary located at
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as a Securities Account at the Federal
Reserve Bank of New York ("FRBNY"). Upon transfer of the Pledged Securities to
the Escrowed Interest Account, and in turn, to the New York Securities
Intermediary Account, the New York Securities Intermediary shall make
appropriate book entries indicating that the Pledged Securities and/or such
Security Entitlement have been registered in the name of the New York Securities
Intermediary, as Securities Intermediary for the Security Agent, who in turn is
Securities Intermediary for the Trustee, each of which will continuously be
maintained on the books of the issuer of the Pledged Securities in the State of
New York. Subject to the other terms and conditions of this Escrow and Security
Agreement, (i) all funds or other property held by the Trustee pursuant to this
Escrow and Security Agreement shall be promptly delivered to the Security Agent
and held in and credited to the Escrowed Interest Account through the New York
Securities Intermediary Account subject (except as expressly provided in Section
7 (a), (b) and (g) hereof) to the exclusive dominion and control (including
"control" as defined in UCC ss. 9-115(1)(e) and UCC ss. 8-106) of the Trustee
and exclusively for the benefit of the Trustee and for the ratable benefit of
the Holders of the Notes and segregated from all other funds or other property
otherwise held by the Trustee and (ii) all funds or other property held by the
Security Agent pursuant to this Escrow and Security Agreement to be applied to
purchase Securities Entitlements with respect to U.S. Government Obligations
shall be promptly delivered to the New York Securities Intermediary and held in
and credited to the New York Securities Intermediary Account subject (except as
expressly provided in Section 7(a), (b) and (g) hereof) to the exclusive
dominion and control (including "control" as defined in UCC ss. 9-115(1)(e) and
UCC ss. 8-106) of the Security Agent and exclusively for the benefit of Security
Agent for the benefit of the Trustee and segregated from all other funds or
property otherwise held by the Security Agreement. The Escrowed Interest Account
shall be maintained by the Security Agent as a Securities Account to which
Financial Assets are or may be credited, and the New York Securities
Intermediary and the Security Agent shall, subject to the terms and conditions
hereof, treat the Trustee as the party entitled to exercise
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the rights with respect to any Financial Asset credited to the Escrowed Interest
Account. The New York Securities Intermediary Account shall be maintained at the
New York Securities Intermediary for the Security Agent as a Securities Account
to which Financial Assets are or may be credited and shall, subject to the terms
and conditions hereof, with the Security Agent as the party entitled to exercise
the rights with respect to any Financial Asset credited thereto. All securities
or other property underlying any Financial Assets credited to the Escrowed
Interest Account through the New York Securities Intermediary Account shall be
registered in the name of the Security Agent endorsed to the Security Agent or
in blank or credited to another securities account maintained in the New York
Securities Intermediary Account in the name of the Security Agent (or the New
York Securities Intermediary for the Security Agent) and in no case will any
Financial Asset credited to the Escrowed Interest Account or the New York
Securities Intermediary Account be registered in the name of the Pledgor,
payable to the order of the Pledgor or specially endorsed to the Pledgor except
to the extent the foregoing have been specially endorsed to the Security Agent
or in blank.
(c) The Trustee and the Security Agent, as the case
may be, shall, in accordance with all applicable laws, have sole dominion and
control (including "control" as defined in UCC ss.9-115(1)(e) and UCC ss. 8-106)
over the Escrowed Interest Account, and it shall be a term and condition of the
Escrowed Interest Account and the Pledgor irrevocably instructs the Trustee and
the Security Agent, notwithstanding any other term or condition to the contrary
in any other agreement, that no Pledged Collateral shall be released to or for
the account of, or withdrawn by or for the account of, the Pledgor or any other
Person except as expressly provided in this Escrow and Security Agreement.
(d) The Trustee and the Security Agent, as the case
may be, shall, in accordance with and subject to all applicable laws, be the
sole entitlement holders of, and have the sole power to originate "Entitlement
Orders" (as defined in UCC ss. 8-102(a)(8)) with respect to, the Escrowed
Interest Account and the New York Securities Intermediary Account, respectively,
and all U.S. Government Obligations held with respect thereto, and it shall be a
term and condition of the Escrowed Interest Account and the Security Agent, as
the case may be, that the Trustee and the Security Agent, respectively, shall
have the right to issue such Entitlement Orders with respect to the Escrowed
Interested Account and the New York Securities Intermediary Account,
respectively, and all assets and properties from time to time carried in the
Escrowed Interest Account and the New York Securities Intermediary Account,
respectively, including Security Entitlements and other "Financial Assets" (as
defined in UCC ss. 8-102(a)(9); it being agreed by each of the parties hereto
that all such assets and properties from time to time carried in the Escrowed
Interest Account shall be treated as "Financial Assets" for the purpose of the
UCC pursuant to UCC ss.8-102(a)(9)(iii)) without further consent of the Pledgor
or any other Person (except, to the extent required under the Indenture, of the
Holders), and that no Collateral shall be released to or for the account of, or
withdrawn by or for the account of, the Pledgor or any other Person except as
expressly provided in this Escrow and Security Agreement.
(e) All Collateral shall be retained in the Escrowed
Interest Account, including Securities Entitlements with respect to Pledged
Securities that are credited
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to the New York Securities Intermediary Account, pending disbursement pursuant
to the terms hereof.
(f) Concurrently with the execution and delivery of
this Escrow and Security Agreement, the Trustee and the Security Agent are
delivering to the Pledgor and to the Initial Purchaser, a duly executed
certificate, in the form of Exhibit A hereto, of an officer of the Trustee,
confirming the Trustee's establishment and maintenance of the Escrowed Interest
Account and the New York Securities Intermediary Account, all accordance with
this Escrow and Security Agreement.
(g) Concurrently with the execution and delivery of
this Escrow and Security Agreement, the Pledgor shall deliver to the Trustee
acknowledgement copies or stamped receipt copies of proper financing statements,
duly filed under the UCC of the State of New York, covering the Collateral
described in this Escrow and Security Agreement.
(h) In the event that the Security Agent has or
subsequently obtains by agreement, operation of law or otherwise a security
interest in the Escrowed Interest Account or any Security Entitlement credited
thereto, the Security Agent hereby agrees that such security interest shall be
subordinate to the security interest of the Trustee. The Financial Assets and
other items deposited to the Escrowed Interest Account or the New York
Securities Intermediary Account will not be subject to deduction, set-off,
banker's lien, or any other right in favor of any person other than the Trustee.
SECTION 4. Maintaining the Security Account.
(a) So long as any Obligation shall remain unpaid,
the Pledgor will maintain the Escrowed Interest Account with the Security Agent,
which shall maintain the New York Securities Intermediary Account with the New
York Securities Intermediary or otherwise with a Securities Intermediary in New
York, New York.
(b) It shall be a term and condition of the Escrowed
Interest Account, notwithstanding any term or condition to the contrary in any
other agreement relating to the Escrowed Interest Account, and except as
otherwise provided by the provisions of Section 7 and Section 14, that no amount
(including interest on Escrowed Funds or Pledged Securities) shall be paid or
released to or for the account of, or withdrawn by or for the account of, the
Pledgor or any other Person (other than the Trustee for the benefit of the
Holders), from the Escrowed Interest Account.
(c) The Escrowed Interest Account and New York
Securities Intermediary Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
SECTION 5. Investments. If requested in writing by the
Pledgor, the Security Agent will, subject to the provisions of Section 7 and
Section 14, from time to time
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(a) invest Escrowed Funds and other amounts on deposit in the Escrowed Interest
Account or the New York Securities Intermediary Account (other than Pledged
Securities) in accordance with Section 1.4 in the name of the Security Agent, as
the Pledgor may select in writing, and (b) invest interest paid on the Pledged
Securities referred to in clause (a) above, and so reinvest other proceeds of
such Pledged Securities that may mature or be sold, in each case in accordance
with Section 1.4 in the name of the Security Agent, as the Pledgor may select in
writing, all of which Pledged Securities shall be maintained in the Escrowed
Interest Account or, as the case may be, through the New York Securities
Intermediary Account. Interest and proceeds that are not invested or reinvested
in Pledged Securities as provided above shall at the option of Pledgor, either
be deposited or remain on deposit in, as the case may be, and held in the
Escrowed Interest Account or the New York Securities Intermediary Account. In no
event shall the Security Agent be liable for any loss in the investment or
reinvestment of amounts held in the Escrowed Interest Account or the New York
Securities Intermediary Account. All such investments selected by the Pledgor
shall be subject to availability to the Security Agent. The Security Agent and
the Trustee shall be under no duty to invest (or otherwise pay interest on) any
amounts held by it hereunder, absent specific written investment instructions
from the Pledgor in accordance with the terms hereof.
SECTION 6. Security Agent's Representations, Warranties and
Covenants. The Security Agent represents and warrants that it is as of the date
hereof, and it agrees that for so long as it maintains the Escrowed Interest
Account and the New York Securities Intermediary Account and acts as Securities
Intermediary pursuant to this Escrow and Security Agreement it, and the New York
Securities Intermediary, shall be a "Securities Intermediary" (as defined in the
UCC and in 31 C.F.R. ss.357.2) and the New York Securities Intermediary shall be
eligible to maintain, and does maintain, a Participant's Securities Account (as
defined in 31 C.F.R. ss.357.2) in the name of the New York Securities
Intermediary with the FRBNY (a "FRBNY Member Securities Account"). In
furtherance of the foregoing, the Security Agent hereby:
(a) represents and warrants that it is a corporation
that in the ordinary course of its business maintains Securities Accounts for
others and is acting in that capacity hereunder and with respect to the Escrowed
Interest Account and that the New York Securities Intermediary in the ordinary
course of its business, maintains Securities Accounts for others and is acting
in that capacity hereunder and with respect to the Escrowed Interest Account
through the New York Securities Intermediary Account;
(b) represents and warrants that it maintains the New
York Securities Intermediary Account at the New York Securities Intermediary
which account is an FRBNY Member Securities Account with the FRBNY and that the
U.S. Government Obligations constituting the Pledged Securities transferred to
the Security Agent and, in turn, the New York Securities Intermediary pursuant
to Section 3 have been credited to the FRBNY Member Securities Account;
(c) agrees that the Escrowed Interest Account shall
be an account to which Financial Assets may be credited, and the Security Agent
undertakes to treat the
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Trustee as the sole person entitled to exercise rights that comprise (and
entitled to the benefits of) such Financial Assets, and entitled to exercise the
rights of an Entitlement Holder and control in the manner contemplated by the
UCC, and further agrees to identify the Trustee in the records of the Security
Agent as the sole person having a Security Entitlement against the Security
Agent with respect to the Escrowed Interest Account and all Financial Assets
credited thereto and further agrees that the New York Securities Intermediary
Account shall be an account to which Financial Assets may be credited, and the
Security Agent shall be the sole person entitled to exercise rights that
comprise (and entitled to the benefits of) such Financial Assets, and entitled
to exercise the rights of an Entitlement Holder and control in the manner
contemplated by the UCC, and further agrees it shall be identified in the
records of the Security Agent and the New York Securities Intermediary as the
sole person having a Security Entitlement against thereto with respect to the
New York Securities Intermediary Account and all Financial Assets credited
thereto;
(d) hereby represents and warrants that it has not
granted, and covenants that so long as it acts as the Security Agent hereunder
it shall not grant, control (including, without limitation, "control" as defined
in UCC ss.9-115(1)(e)) over or with respect to any Pledged Securities or
Escrowed Funds credited to the Escrowed Interest Account or the New York
Securities Intermediary Account from time to time to any other Person other than
the Trustee;
(e) covenants that in its capacity as Security Agent
hereunder and with respect to the Escrowed Interest Account and the New York
Securities Intermediary Account, it shall not take any action inconsistent with,
and represents and covenants that it is not and so long as this Escrow and
Security Agreement remains in effect will not become party to any agreement, the
terms of which are inconsistent with the provisions of this Escrow and Security
Agreement;
(f) agrees, with the other parties to this Escrow and
Security Agreement, that any item of property credited to the Escrowed Interest
Account or the New York Securities Intermediary Account shall be treated as a
Financial Asset;
(g) agrees, with the other parties to this Escrow and
Security Agreement, so long as it serves as the Security Agent pursuant to this
Escrow and Security Agreement, to maintain the Escrowed Interest Account and the
New York Securities Intermediary Account, each as a Securities Account and
maintain appropriate books and records in respect thereof in accordance with its
usual procedures and subject to the terms of this Escrow and Security Agreement;
(h) agrees, with the other parties to this Escrow and
Security Agreement, that the Security Agent's and the New York Securities
Intermediary's jurisdiction, respectively, for purposes of UCC ss. 8-110(e) and
31 C.F.R. 357.11(b) as it pertains to this Escrow and Security Agreement, the
Escrowed Interest Account, the New York Securities Intermediary Account, and
Security Entitlements relating thereto, shall be the State of New York;
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(i) agrees that it is and shall remain a Securities
Entitlement holder in the Escrowed Interest Account and the New York Securities
Intermediary Account held at the New York Securities Intermediary or other
Securities Intermediary in New York, New York; and
(j) represents and warrants that: (i) there are no
other agreements entered into between the Security Agent and the Pledgor with
respect to the Escrowed Interest Account or the New York Securities Intermediary
Account and (ii) except for the claims and interest of the Trustee and of the
Pledgor in the Escrowed Interest Account, the Security Agent does not know of
any claim to, or interest in, the Escrowed Interest Account or the New York
Securities Intermediary Account or in any Financial Asset credited thereto. In
the event of any conflict between this Escrow and Security Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered into,
the terms of this Escrow and Security Agreement shall prevail.
SECTION 7. Disbursements. The Security Agent shall hold the
Collateral in the Escrowed Interest Account, including Securities Entitlements
with respect to the Book Entry Securities credited to the New York Securities
Intermediary Account, and release the same, or a portion thereof, only as
directed by the Trustee. The Trustee agrees to direct the Security Agent (and
the Security Agent agrees to direct the New York Securities Intermediary) as
follows:
(a) At least five Business Days prior to the due date
of any of the first five scheduled interest payments on the Notes from the Issue
Date through August 1, 1999, the Pledgor may, pursuant to written instructions
executed by the Pledgor (an "Issuer Order"), direct the Trustee to cause the
Security Agent to release from the Escrowed Interest Account and pay to the
Holders proceeds sufficient to provide for payment in full of the scheduled
interest then due on the Notes. Upon receipt of an Issuer Order, the Trustee
will take any action necessary to provide for the payment of the scheduled
interest on the Notes in accordance with the payment provisions of the Indenture
to the Holders from (and to the extent of) the Collateral, including Securities
Entitlements with respect to the Pledged Securities maintained in the New York
Securities Intermediary Account, Escrowed Funds and proceeds thereof in the
Escrowed Interest Account. Nothing in this Section 7 shall affect the Trustee's
rights to apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or
portion of an interest payment for which the Collateral is security from a
source of funds other than the Escrowed Interest Account ("Pledgor Funds"), the
Pledgor may, after payment in full of such interest payment or portion thereof
from proceeds of the Collateral or such Pledgor Funds or both, direct the
Security Agent to release to the Pledgor or to another party at the direction of
the Pledgor (the "Pledgor's Designee"), net of any costs, fees or expenses (such
as breakage fees) incurred to permit such release, proceeds from the Escrowed
Interest Account, including with respect to Securities Entitlements in the
Pledged Securities maintained in the New York Securities Intermediary Account,
in an amount less than or
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equal to the amount of Pledgor Funds appropriately applied to such interest
payment so that there remains in the Escrowed Interest Account, including with
respect to Securities Entitlements in the Pledged Securities maintained in the
New York Securities Intermediary Account, an amount at least sufficient to pay
in full, after receipt of scheduled interest and principal payments on Pledged
Securities, in the written opinion of an Independent Financial Advisor (which
written opinion shall accompany any Issuer Order), the remaining of the first
five interest payments due on the Notes. Upon receipt of an Issuer Order and the
related written opinion of such Independent Financial Advisor by the Trustee,
the Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the case
may be, the appropriate requested amount from proceeds in the Escrowed Interest
Account, including with respect to Securities Entitlements in the Pledged
Securities maintained in the New York Securities Intermediary Account.
Immediately prior to any release of funds to the Pledgor pursuant to this
Section 7(b), Section 7(d) or Section 7(g), the Pledgor shall deliver to the
Security Agent a certificate signed by an officer of the Pledgor stating that
such release has been duly authorized by the Pledgor and will not contravene any
provision of applicable law or the Certificate of Incorporation of the Pledgor
or any material agreement or other material instrument binding upon the Pledgor
or any of its subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor or any of its
subsidiaries or result in the creation or imposition of any security interest in
or lien on any assets of the Pledgor, except for the security interests granted
under this Escrow and Security Agreement.
(c) At least five Business Days prior to the due date
of any of the first five scheduled interest payments on the Notes (or one
Business Day in the case of the first such interest payment), the Pledgor
covenants to give the Trustee (by Issuer Order) notice as to the amount of
interest that will be paid pursuant to Section 7(a) or (b) and as to the
respective amounts of interest that will be paid pursuant to Section (a) or (b).
If no such notice is given by such fifth Business Day (or one Business Day in
the case of the first such interest payment) prior to the respective first five
scheduled interest payments on the Notes, the Trustee will act pursuant to
Section 7(a) as if it had received an Issuer Order pursuant thereto for the
payment in full of the scheduled interest then due.
(d) If Pledgor has optionally redeemed Notes with the
net proceeds of a Primary Offering, the Pledgor may, pursuant to an Issuer
Order, direct the Trustee to release to Pledgor proceeds from the Escrowed
Interest Account, including with respect to Securities Entitlements in the
Pledged Securities maintained in the New York Securities Intermediary Account,
in an amount which bears the same proportion to the aggregate value of the
Collateral on deposit in or otherwise credited to Escrowed Interest Account,
including the value of Securities Entitlements with respect to the New York
Securities Intermediary Account, immediately prior to the release of such
proceeds as the aggregate principal amount of the Notes so redeemed by Pledgor
bears to the aggregate principal amount of the Notes outstanding immediately
prior to such redemption, net of any costs, fees or expenses (such as breakage
fees) incurred to permit such release, so that there remains in the Escrowed
Interest Account, including Securities Entitlements with respect to the New York
Securities Intermediary Account, an amount sufficient to pay in full, after
receipt of scheduled interest and principal payments on Pledged Securities, in
the written opinion of an Independent
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Financial Advisor (which written opinion shall accompany any Issuer Order) the
remaining of the first five interest payments due on the Notes. Immediately
prior to any release of funds to the Pledgor pursuant to this Section 7(d), the
Pledgor shall deliver any and all certificates described in and pursuant to
Section 7(b).
(e) Upon the occurrence and after the continuation of
an Event of Default, the Trustee in its sole and absolute discretion may apply
any or all Collateral, including the Escrowed Funds and the Pledged Securities,
to the payment of all Obligations and any and all principal of and interest and
expenses on the Notes, in accordance with the terms and provisions of Section
14.
(f) Upon payment in full of the first five scheduled
interest payments on the Notes in a timely manner, and if no Event of Default
has occurred and is continuing, the security interest in the Collateral
evidenced by this Escrow and Security Agreement will automatically terminate and
be of no further force and effect and upon receipt of an Issuer Order in
accordance with Section 17.9(b) hereof, the Collateral remaining, if any, shall
promptly be paid over and transferred to the Pledgor. Furthermore, upon the
release of any Collateral from the Escrowed Interest Account or the New York
Securities Intermediary Account in accordance with the terms of this Escrow and
Security Agreement, whether upon release of Collateral to Holders as payment of
interest or otherwise, the security interest evidenced by this Escrow and
Security Agreement in such released Collateral will automatically terminate and
be of no further force and effect.
(g) If at any time, the total of the Escrowed Funds
and the Pledged Securities exceed the amount sufficient to pay in full, after
receipt of scheduled interest and principal payments on the Pledged Securities,
in the written opinion of the Independent Financial Advisor delivered to the
Trustee, the remaining of the first five scheduled interest payments due on the
Notes, and no Event of Default has occurred and shall be continuing, the Pledgor
may, pursuant to an Issuer Order, direct the Trustee to release from the
Escrowed Interest Account or, as the case may be, the New York Securities
Intermediary Account, any such overfunded amount of the Escrowed Funds (existing
on the Issue Date) to the Pledgor, net of any costs, fees and expenses (such as
brokerage fees) incurred to permit such release, so that there remains in the
Escrowed Interest Account through the New York Securities Intermediary Account,
an amount at least sufficient to pay in full, after receipt of scheduled
interest and principal payments on the Pledged Securities, in such written
opinion of the Independent Financial Advisor, the remaining of the first five
scheduled interest payments due on the Notes. Immediately prior to any release
of such funds to the Pledgor pursuant to this Section 7(g), the Pledgor shall
deliver any and all certificates described in and pursuant to Section 7(b). Upon
receipt of the foregoing certificates, Issuer Order and opinion, the Trustee
shall pay over to the Pledgor such overfunded amounts, net of such costs, fees
or expenses.
(h) The Trustee may, but shall not be required to,
liquidate any Escrowed Funds or Pledged Securities, in whole or in part, in
order to make any scheduled payment of interest or any release or other required
payment hereunder and shall not be responsible for any loss, cost or expense,
including any breakage fee, diminution in principal
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or penalty in connection therewith, all of which loss, cost or expense shall be
borne solely by the Pledgor.
(i) Nothing contained in Section 1, Section 5, this
Section 7 or any other provision of this Escrow and Security Agreement shall (i)
afford the Pledgor any right to issue entitlement orders with respect to any
Security Entitlement to the Escrowed Funds, the Pledged Securities or any
securities account in which any such Security Entitlement may be carried, or
otherwise afford the Pledgor control of any such Security Entitlement or (ii)
otherwise give rise to any rights of Pledgor with respect to the Escrowed Funds,
the Pledged Securities, any Security Entitlement thereto or any securities
account in which any such Security Entitlement may be carried, other than the
Pledgor's rights under this Escrow and Security Agreement as the beneficial
owner of Collateral pledged to and subject to the exclusive dominion and control
(including "control" as defined in UCC ss. 9-115(1)(e) and UCC ss. 8-106)
(except as expressly provided in Sections 7(a) - (g) hereof) of the Trustee in
its capacity as such (and not as a Securities Intermediary). The Pledgor
acknowledges, confirms and agrees that the Trustee holds a Security Entitlement
to the Escrowed Funds and the Pledged Securities, as applicable, solely as
escrow agent for the Holders and not as a securities intermediary.
SECTION 8. Representations and Warranties. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and
the performance by the Pledgor of its obligations under, this Escrow and
Security Agreement does not contravene any provision of applicable law or the
Certificate of Incorporation of the Pledgor or any material agreement or other
material instrument binding upon the Pledgor or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any security interest on any assets of the Pledgor,
except for the security interest granted under this Escrow and Security
Agreement; no consent, approval, authorization or order of, or qualification
with, any governmental body or agency that have not been obtained is required
(i) for the performance by the Pledgor of its obligations under this Escrow and
Security Agreement, (ii) for the pledge by the Pledgor of the Collateral
pursuant to this Escrow and Security Agreement or (iii) except for any such
consents, approvals, authorizations or orders required to be obtained by the
Trustee (or the Holders) for reasons other than the consummation of this
transaction, for the exercise by the Trustee of the rights provided for in this
Escrow and Security Agreement or the remedies in respect of the Collateral
pursuant to this Escrow and Security Agreement.
(b) The Pledgor is the beneficial owner of the
Collateral, free and clear of any security interest or any Lien or claims of any
person or entity (except for the security interests granted under this Escrow
and Security Agreement). No financing statement covering the Pledgor's interest
in the Collateral is on file in any public office other than the financing
statements, if any, filed pursuant to this Escrow and Security Agreement and no
notice to or arrangement with any financial institution (other than the Security
Agent)
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has been made regarding any security interest in or Lien on or nominee
arrangement for any Collateral.
(c) This Escrow and Security Agreement has been duly
authorized, validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Escrow and Security
Agreement by the Trustee and the Security Agent and enforceability of the Escrow
and Security Agreement against the Trustee and the Security Agent in accordance
with its terms) constitutes the valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as (i) the
enforceability hereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, preference, reorganization, moratorium or similar laws now or
hereafter in effect relating to or affecting creditors' rights or remedies
generally, (ii) equitable remedies may be limited by equitable principles of
general applicability and the discretion of the court before which any
proceeding therefor may be brought, (iii) the exculpation provisions and rights
to indemnification hereunder may be limited by U.S. federal and state securities
laws and public policy considerations and (iv) the waiver of rights and defenses
contained in Section 14(b), Section 17.11 and Section 17.16 hereof may be
limited by applicable law.
(d) Upon execution and delivery of this Escrow and
Security Agreement, the pledge of and grant of a security interest in the
Collateral securing the payment of the Obligations for the benefit of the
Security Agent and the Holders constitute a first priority perfected security
interest in such Collateral, enforceable as such against all creditors of the
Pledgor (and any persons purporting to purchase any of the Collateral from the
Pledgor).
(e) There are no legal or governmental proceedings
pending or, to the best of the Pledgor's knowledge, threatened to which the
Pledgor or any of its subsidiaries is a party or to which any of the properties
of the Pledgor or any such subsidiary will be subject that would materially
adversely affect the power or ability of the Pledgor to perform its obligations
under this Escrow and Security Agreement or to consummate the transactions
contemplated hereby.
(f) The pledge of the Collateral pursuant to this
Escrow and Security Agreement is not prohibited by law or governmental
regulation (including, without limitation, Regulations T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default, or event which with notice
or passage of time or both would be an Event of Default, exists.
SECTION 9. Further Assurances. The Pledgor will, promptly upon
request by the Trustee (which request the Trustee may submit at the direction of
the Holders of at least a majority in principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or use
its reasonable best efforts to procure, all assignments, instruments and other
documents, deliver any instruments to the Trustee and take any other actions
that are necessary or desirable to perfect, continue the perfection of or
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protect the first priority of the Trustee's security interest in and to the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons (other than any such rights, claims or interests created by or
arising through the Trustee) or to effect the purposes of this Escrow and
Security Agreement. The Pledgor also hereby authorizes the Trustee to file any
financing or continuation statements in the United States with respect to the
Collateral without the signature of the Pledgor (to the extent permitted by
applicable law). The Pledgor will promptly pay all costs incurred in connection
with any of the foregoing within 30 days of receipt of an invoice therefor. The
Pledgor also agrees, whether or not requested by the Security Agent, to take all
actions that are necessary to perfect or continue the perfection of, or to
protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, and to protect the Collateral against the rights, claims or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Security Agent).
SECTION 10. Covenants. The Pledgor covenants and agrees with
the Trustee and the Holders that from and after the date of this Escrow and
Security Agreement until the earlier of payment in full in cash of (x) each of
the first five scheduled interest payments due on the Notes under the terms of
the Indenture or (y) all obligations due and owing under the Indenture and the
Notes in the event such obligations become due and payable prior to the payment
of the first five scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to)
sell or otherwise dispose of, or grant any option or warrant with respect to,
any of the Collateral or (ii) it will not create or permit to exist any Lien
upon or with respect to any of the Collateral (except for the security interests
granted under this Escrow and Security Agreement and any Lien created by or
arising through the Security Agent) and at all times will be the sole beneficial
owner of the Collateral; or
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit the
Security Agent's rights or remedies hereunder, including, without limitation,
the Security Agent's right to sell or otherwise dispose of the Collateral
pursuant to the terms hereof or (ii) fail to pay or discharge any tax,
assessment or levy of any nature with respect to the Collateral not later than
five days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to the Collateral.
SECTION 11. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, the Pledgor hereby
appoints and constitutes the Trustee as the Pledgor's attorney-in-fact (with
full power of substitution) to exercise to the fullest extent permitted by law
all of the following powers upon and at any time after the occurrence and during
the continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Security Agent in its sole reasonable discretion, and
such payments made by the Security Agent to
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become part of the Obligations, due and payable immediately upon demand. The
Security Agent's authority under this Section 11 shall include, without
limitation, the authority to endorse and negotiate any checks, certificates or
instruments representing proceeds of Collateral bearing the name of the Pledgor
into the name of the Security Agent, execute and give receipt for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and to take any other actions arising
from or incident to the powers granted to the Trustee in this Escrow and
Security Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order to
preserve and protect the security interest of the Trustee and the Holders in and
to the Collateral granted hereby and shall not be interpreted to, and shall not
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law and no implied
covenants, functions, responsibilities, duties, obligations, or liabilities
shall be read into this Escrow and Security Agreement or otherwise exist against
the Trustee. Except as provided by applicable law or by the Indenture, the
Security Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession (directly or through the
New York Securities Intermediary) if the Collateral is accorded treatment
substantially equal to that which the Security Agent accords similar property
held by the Security Agent for similar accounts, it being understood that the
Security Agent in its capacity as such shall not have any responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or not the
Security Agent has or is deemed to have knowledge of such matters, (b) taking
any necessary steps to preserve rights against any parties with respect to any
Collateral or (c) investing or reinvesting any of the Collateral, provided,
however, that nothing contained in this Escrow and Security Agreement shall
relieve the Security Agent of any responsibilities as a securities intermediary
under applicable law.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and the Security Agent and their respective
directors, officers, agents and employees, from and against any and all claims,
actions, obligations, liabilities and expenses, including reasonable defense
costs and expenses, reasonable investigative fees and costs, and reasonable
legal fees and damages arising from the Trustee's and Security Agent's
performance under this Escrow and Security Agreement, except to the extent that
such claim, action, obligation, liability or expense is directly attributable to
the bad faith, gross negligence or wilful misconduct of such indemnified person.
SECTION 14. Remedies Upon Event of Default. If any Event of
Default under the Indenture (any such Event of Default being referred to in this
Escrow and Security Agreement as an "Event of Default") shall have occurred and
be continuing:
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(a) The Trustee and the Holders shall have, in
addition to all other rights given by law or by this Escrow and Security
Agreement or the Indenture or any other Collateral Agreement, all of the rights
and remedies with respect to the Collateral of a secured party under the UCC in
effect in the State of New York at that time. In addition, with respect to any
Collateral, the Trustee may and, at the direction of the Holders of a majority
in principal amount of the Notes then outstanding, shall, sell or cause the same
to be sold at any broker's board or at public or private sale, in one or more
sales or lots, at such price or prices as the Trustee may deem best, for cash or
on credit or for future delivery, without assumption of any credit risk. The
purchaser of any or all Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind whatsoever
created by or through the Pledgor. Unless any of the Collateral threatens, in
the reasonable judgment of the Trustee, to decline speedily in value or is or
becomes of a type sold on a recognized market, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is delivered to the address of the recipient in and
in accordance with Section 17.1 hereof at least ten days before the time of the
sale or disposition. The Trustee or any Holder of Notes may, in its own name or
in the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable attorneys' fees, expenses and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Collateral.
(b) The Pledgor further agrees to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Collateral pursuant to this Section 14 valid and binding
and in compliance with the Indenture and any and all other applicable
requirements of law. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 14 will cause irreparable injury to the
Trustee and the Holders, that the Trustee and the Holders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 14 shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to each
of the Trustee and the Security Agent the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees, expenses and
disbursements of its counsel, experts and agents retained by each of the Trustee
and the Security Agent, that each of the Trustee and the Security Agent may
incur in connection with (a) the review, negotiation and administration of this
Escrow and Security Agreement, (b) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (c) the
exercise
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or enforcement of any of the rights of the Trustee and the Holders hereunder or
(d) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 16. Security Interest Absolute. All rights of the
Trustee and the Holders and security interests and Liens hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations or other
obligations under the Indenture, or any other amendment or waiver of or any
consent to any departure from the Indenture;
(c) any taking, exchange, surrender or release of, or
non-perfection of any Liens on, any other collateral for all or any of the
Obligations, or any taking, release or amendment or waiver from any guaranty for
all or any of the Obligations;
(d) any change, restructuring or termination of the
corporate structure or the existence of the Pledgor or any of its subsidiaries;
or
(e) to the extent permitted by applicable law, any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Escrow and
Security Agreement.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to the Pledgor:
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
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with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to the Security Agent:
Firstar Bank of Minnesota, N.A.
000 Xxxx 0xx Xxxxxx
Xx. Xxxx, XX 00000
Attn: Corporate Trust
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to the Trustee:
Firstar Bank of Minnesota, N.A.
000 Xxxx 0xx Xxxxxx
Xx. Xxxx, XX 00000
Attn: Corporate Trust
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
Each of the Pledgor, the Trustee and Security Agent by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Pledgor or the
Trustee and Security Agent shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if faxed; and five calendar days after mailing if sent
by registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by the
addressee).
17.2. No Adverse Interpretation of Other Agreements. This
Escrow and Security Agreement may not be used to interpret another pledge,
security or debt agreement of the Pledgor or any subsidiary thereof. No such
pledge, security or debt agreement (other than the Indenture) may be used to
interpret this Escrow and Security Agreement.
17.3. Severability. The provisions of this Escrow and Security
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner
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affect such clause or provision in any other jurisdiction or any other clause or
provision of this Escrow and Security Agreement in any jurisdiction.
17.4. Headings. The headings in this Escrow and Security
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
17.5. Counterpart Originals. This Escrow and Security
Agreement may be signed in two or more counterparts, each of which shall be
deemed an original, but all of which shall together constitute one and the same
agreement.
17.6. Benefits of Escrow and Security Agreement. Nothing in
this Escrow and Security Agreement, express or implied, shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Escrow and Security Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Escrow and Security Agreement and any consent to
any departure by the Pledgor from any provision of this Escrow and Security
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Security Agent nor
any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Security Agent or any Holder of Notes to
exercise, or delay in exercising, any right, power or privilege hereunder shall
not preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Security Agent or any Holder of Notes
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that the Security Agent or such Holder of Notes would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
17.8. Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the UCC, except
where the context otherwise requires. To the extent a term or provision of this
Escrow and Security Agreement conflicts with the Indenture, the Indenture shall
control with respect to the subject matter of such term or provision. Acceptance
of or acquiescence in a course of performance rendered under this Escrow and
Security Agreement shall not be relevant to determine the meaning of this Escrow
and Security Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
17.9. Continuing Security Interest; Termination.
(a) This Escrow and Security Agreement shall create a
continuing security interest in and to and Lien on the Collateral and shall,
unless otherwise provided in the Indenture or in this Escrow and Security
Agreement, remain in full force and effect until
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the payment in full in cash of the Obligations. This Escrow and Security
Agreement shall be binding upon the Pledgor, its transferees, successors and
assigns, and shall inure, together with the rights and remedies of the Security
Agent hereunder, to the benefit of the Trustee, the Holders and their respective
successors, transferees and assigns.
(b) This Escrow and Security Agreement shall
terminate upon the payment in full in cash of the Obligations. At such time, the
Trustee shall cause the Security Agent, pursuant to an Issuer Order, and subject
to and in accordance with the applicable terms of the Indenture, if any, to
reassign and redeliver to the Pledgor all of the Collateral hereunder that has
not been sold, disposed of, retained or applied by the Trustee in accordance
with the terms of this Escrow and Security Agreement and the Indenture such that
such Collateral will be subject in all respects to a valid and existing security
interest and Lien under the Indenture and Security Agreement. Such reassignment
and redelivery shall be without warranty by or recourse to the Security Agent in
its capacity as such, except as to the absence of any Liens on the Collateral
created by or arising through the Trustee (except as may be granted under the
Indenture or Security Agreement or other Collateral Agreement), and shall be at
the cost and expense of the Pledgor.
17.10. Survival Provisions. All representations, warranties
and covenants of the Pledgor contained herein shall survive the execution and
delivery of this Escrow and Security Agreement, and shall terminate only upon
the termination of this Escrow and Security Agreement. The obligations of the
Pledgor under Sections 13 and 15 hereof shall survive the termination of this
Escrow and Security Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12. Authority of the Security Agent.
(a) The Security Agent shall have and be entitled to
exercise all powers hereunder that are specifically granted to the Security
Agent by the terms hereof, together with such powers as are reasonably incident
thereto. The Security Agent may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Escrow and Security Agreement or the Indenture, neither the Security Agent nor
any director, officer, employee, attorney or agent of the Security Agent shall
be liable to the Pledgor for any action taken or omitted to be taken by the
Security Agent, in its capacity as Security Agent, hereunder, except for its own
bad faith, gross negligence or willful misconduct, and the Security Agent shall
not be responsible for the validity, effectiveness or sufficiency hereof or of
any document or security furnished pursuant hereto. The Security Agent and its
directors, officers, employees, attorneys and agents shall be entitled to rely
on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons. The Security Agent shall have
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no duty to cause any financing statement or continuation statement to be filed
in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Security Agent under this Escrow and Security Agreement
with respect to any action taken by the Security Agent or the exercise or
non-exercise by the Security Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Escrow and Security Agreement shall, as between the Security Agent and the
Holders, be governed by the Indenture and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the Security
Agent and the Pledgor, the Security Agent shall be conclusively presumed to be
acting as agent for the Holders with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
(c) The Security Agent shall maintain appropriate
books and records with respect to the Collateral in which shall be recorded all
deposits and transactions in and disbursements from the Security Account and
regarding the Pledged Securities and shall permit the Pledgor to inspect and to
make copies of such books and records at the Pledgor's sole cost and expense.
17.13. Successor Security Agent. The term Security Agent shall
mean the Person named as the "Security Agent" in the first paragraph of this
Escrow and Security Agreement until a successor Security Agent shall have become
such, and thereafter "Security Agent" shall mean the Person who is then the
Security Agent hereunder. If the Security Agent consolidates with, merges or
converts into, or transfers all or substantially all of its corporate trust
business to another entity, the resulting, surviving or transferee entity,
without any further act, shall be the successor Security Agent.
17.14. Final Expression. This Escrow and Security Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Escrow and
Security Agreement and is intended as a complete and exclusive statement of the
terms and conditions thereof.
17.15. Rights of Holders. No Holder of Notes shall have any
rights granted to individual Holders pursuant to Section 6.7 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Security Agent under the Notes or the Indenture.
17.16. GOVERNING LAW, SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; WAIVER OF DAMAGES.
(a) THIS ESCROW AND SECURITY AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE SECURITY AGENT AND THE TRUSTEE
AND/OR THE HOLDERS
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IN CONNECTION WITH THIS ESCROW AND SECURITY AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS
IDENTIFIED IN 31 C.F.R. PART 357, 61 FED. REG. 43626 (AUGUST 23, 1996) SHALL BE
GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN. THE SECURITY ACCOUNT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. REGARDLESS OF ANY PROVISION IN
ANY OTHER AGREEMENT, FOR PURPOSES OF THE UCC, NEW YORK SHALL BE DEEMED TO BE THE
SECURITY AGENT'S LOCATION AND THE ESCROWED INTEREST ACCOUNT (AS WELL AS THE
SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
(b) THE PLEDGOR AGREES THAT THE SECURITY AGENT SHALL,
IN ITS CAPACITY AS SECURITY AGENT OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF
NOTES, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED
AGAINST THE PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY
SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE
PLEDGOR OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE SECURITY AGENT TO
REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE SECURITY AGENT. THE PLEDGOR AGREES THAT IT WILL NOT
ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY
THE SECURITY AGENT TO REALIZE ON SUCH COLLATERAL OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE SECURITY AGENT, WITH RESPECT TO SUCH
COLLATERAL, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT
ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE
PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
THE CITY OF NEW YORK ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN
THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(c) THE RIGHTS AND POWERS GRANTED TO THE SECURITY
AGENT HEREUNDER ARE BEING GRANTED IN ORDER TO PRESERVE AND PROTECT THE SECURITY
INTEREST OF THE TRUSTEE AND THE HOLDERS IN AND TO THE COLLATERAL GRANTED HEREBY
AND SHALL NOT BE INTERPRETED TO, AND SHALL NOT IMPOSE ANY DUTIES ON THE SECURITY
AGENT IN CONNECTION THEREWITH OTHER THAN THOSE EXPRESSLY PROVIDED HEREIN OR
IMPOSED UNDER APPLICABLE LAW AND NO IMPLIED COVENANTS, FUNCTIONS,
RESPONSIBILITIES, DUTIES, OBLIGATIONS, OR LIABILITIES SHALL BE READ INTO THIS
ESCROW AND SECURITY AGREEMENT OR OTHERWISE EXIST AGAINST THE SECURITY AGENT.
EXCEPT AS PROVIDED BY APPLICABLE LAW OR BY THE INDENTURE, THE SECURITY AGENT
SHALL
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BE DEEMED TO HAVE EXERCISED REASONABLE CARE IN THE CUSTODY AND PRESERVATION OF
THE COLLATERAL IN ITS POSSESSION IF THE COLLATERAL IS ACCORDED TREATMENT
SUBSTANTIALLY EQUAL TO THAT WHICH THE SECURITY AGENT ACCORDS SIMILAR PROPERTY
HELD BY THE SECURITY AGENT FOR SIMILAR ACCOUNTS, IT BEING UNDERSTOOD THAT THE
SECURITY AGENT IN ITS CAPACITY AS SUCH SHALL NOT HAVE ANY RESPONSIBILITY FOR (A)
ASCERTAINING OR TAKING ACTION WITH RESPECT TO CALLS, CONVERSIONS, EXCHANGES,
MATURITIES OR OTHER MATTERS RELATIVE TO ANY COLLATERAL, WHETHER OR NOT THE
SECURITY AGENT HAS OR IS DEEMED TO HAVE KNOWLEDGE OF SUCH MATTERS, (B) TAKING
ANY NECESSARY STEPS TO PRESERVE RIGHTS AGAINST ANY PARTIES WITH RESPECT TO ANY
COLLATERAL OR (C) INVESTING OR REINVESTING ANY OF THE COLLATERAL, PROVIDED,
HOWEVER, THAT NOTHING CONTAINED IN THIS ESCROW AND SECURITY AGREEMENT SHALL
RELIEVE THE SECURITY AGENT OF ANY RESPONSIBILITIES AS A SECURITIES INTERMEDIARY
UNDER APPLICABLE LAW.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Pledgor, the Initial Purchaser, the Trustee and
the Security Agent have each caused this Escrow and Security Agreement to be
duly executed and delivered as of the date first above written.
Pledgor:
DISCOVERY ZONE, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Trustee:
FIRSTAR BANK OF MINNESOTA, N.A.
By: /s/ Xxxxx X. Xxxxxx, III
-----------------------------------------
Name: Xxxxx X. Xxxxxx, III
Title: Vice President
Initial Purchaser:
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
Security Agent:
FIRSTAR BANK OF MINNESOTA, N.A.
By: /s/ Xxxxx X. Xxxxxx, III
----------------------------------------
Name: Xxxxx X. Xxxxxx, III
Title: Vice President
EXHIBIT A
FIRSTAR BANK OF MINNESOTA, N.A.
OFFICER'S CERTIFICATE
Pursuant to Section 6(f) of the Escrow and Security Agreement
(the "Escrow and Security Agreement") dated as of July __, 1998 by and among
Discovery Zone, Inc. (the "Pledgor"), Xxxxxxxxx & Company, Inc. (the "Initial
Purchaser"), Firstar Bank of Minnesota, N.A., as trustee (the "Trustee") and as
securities intermediary (the "Security Agent"), for the holders of the Pledgor's
13 1/2% Senior Collateralized Notes, due 2002, the undersigned officer of the
Security Agent, on behalf of the Security Agent, makes the following
certifications to the Pledgor and the Initial Purchaser. Capitalized terms used
and not defined in this Officer's Certificate have the meanings set forth or
referred to in the Escrow and Security Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Officer's Certificate, the Security Agent has established: (i)
a securities account at its offices, as Securities Intermediary, (the "Escrowed
Interest Account") with respect to which the Trustee is the Entitlement Holder
and through which the Trustee has acquired a Security Entitlement to Collateral
and (ii) a securities account at the New York, New York offices of Bankers Trust
Company, as Securities Intermediary (the "New York Securities Intermediary
Account") with respect to which the Security Agent is the Entitlement Holder and
through which the Security Agent has acquired a Security Entitlement to the
Collateral. The Security Agent has sole dominion and control and has made
appropriate book entries in its records establishing that such Collateral and
the Trustee's security entitlement thereto have been credited to and are held in
the Escrowed Interest Account or the New York Securities Intermediary Account,
as applicable.
2. The Security Agent has established and maintained and will
maintain the Escrowed Interest Account and the New York Securities Intermediary
Account and all Securities Entitlements and other positions carried in the
Escrowed Interest Account and the New York Securities Intermediary Account
solely in its capacity as Security Agent and has not asserted and will not
assert any claim to or interest in the Escrowed Interest Account or the New York
Securities Intermediary Account or any such Securities Entitlements or other
positions except in such capacity.
3. The Trustee has acquired its Security Entitlement to the
Collateral for value and without notice of any adverse claim thereto. Without
limiting the generality of the foregoing, the Collateral is not and the
Trustee's Security Entitlement to such Collateral is not, to the Trustee's
knowledge, subject to any Lien granted by or to or arising through or in favor
of any Securities Intermediary (including, without limitation, the Trustee or
the Federal Reserve Bank of New York) through which the Trustee derives its
Security Entitlement to the Collateral).
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4. The Security Agent has not caused or permitted the
Collateral or its Security Entitlement thereto or any other assets in the
Escrowed Interest Account or the New York Securities Intermediary Account to
become subject to any Lien created by or arising through the Security Agent.
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IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of Firstar Bank of Minnesota, N.A., as Trustee,
and Firstar Bank of Minnesota, N.A., as Security Agent, this ____ day of July,
1998.
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
By: ______________________________
Name: Xxxxx X. Xxxxxx, III
Title: Vice President
FIRSTAR BANK OF MINNESOTA, N.A.
as Security Agent
By: ______________________________
Name: Xxxxx X. Xxxxxx, III
Title: Vice President
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SCHEDULE A
Escrowed Interest Account:
Firstar Bank of Minnesota, N.A., as Trustee - Re: Discovery Zone, Inc.
Firstar Bank of Minnesota, N.A.
Account No.: 00-00000-00
New York Securities Intermediary Account:
Firstar Bank of Minnesota, N.A., as Trustee - Re: Discovery Zone, Inc.
Bankers Trust Company
Account No.: 00-000-000
-4-
